Two weeks ago, I sent you a trade alert on Columbia Sportswear (Nasdaq: COLM). The next day, shares tumbled as fellow retailers Skechers and Under Armour posted weak results. Clearly, this is a case of guilt by association.
Indeed, Columbia is cruising higher today after reporting strong earnings overnight. So now we’re locking in a triple-digit gain on half of our position:
Action to take: Set a Good ‘Til Canceled limit order to sell to close one half of your position in the COLM January 2016 $55 call option (COLM160115C00055000) at a price of $8.20 — or whatever price gives you 100% based on your original cost. The last trade in this option went off at $9. If your order is not filled by my next dispatch, I will update you on the trade.
The stock is moving around a lot today. So our orders might not be filled. But just leave them in place and I will update you as necessary.
The fact is that neither Skechers nor Under Armour are part of a winter-weather pattern. So just because they reported flea-bitten results for their summer does not have any bearing on what Columbia will do this winter. Indeed, Columbia reported better-than-expected results, and the shares shot up more than 11% this morning … meaning that our position that was down as much as 60% in value last Friday on the Under Armour/Skechers news, was up more than 100% a week later.
Now, on to our main trade for today…
Once the snow melts, and spring edges closer, people who have been cooped up all winter will start thinking about venturing outside.
And as you know, this winter is going to be a bear, despite all the calls I’m hearing in the media that we’re in for a mild winter; Chris Orr says that’s not so. So even more people will be ready to bolt outdoors when the snow clears. That’s why we’re already looking to spring, and plotting out the trends headed our way.
One company has stood out among my charts: MarineMax (NYSE: HZO), the largest recreational boat dealer in the U.S. As the company has stated: “Our business, as well as the entire recreational boating industry, is highly seasonal.”
From now through April, MarineMax’s stock historically experiences a strong uptrend. That’s a result of investors pushing up shares on the expectation that customers will buy boats in the new year ahead of boating and fishing season — which is when MarineMax makes the bulk of its revenue. It sees sales start up in January with the onset of public boat shows, but its busiest time tends to be in April, May and June.
But Wall Street isn’t designed to wait around for results. It’s built to “front run” — it wants to get out ahead of the results on expectations that good news is coming. It’s the old adage “buy the rumor, sell the news.”
So, to capture that strong seasonal trend, we’re going to buy April calls today.
Here’s what I want you to do:
Action to take: Set a Good ‘Til Canceled limit order to buy to open the HZO April 2016 $15 call option (HZO160415C00015000) at $2.75. If your order is not filled by my next dispatch, I will update you on what to do next.
Please note: This trade is similar to the ones we made on National Beverage (Nasdaq: FIZZ) and Toro (NYSE: TTC): It’s an ordinary call option recommendation … but we will be among the first traders to place an open order, meaning there aren’t any open positions, so we’re trying to establish the market. The spread is also a bit wide, sitting at a $1.45 bid and $3.60 ask. So we are going to start our orders at $2.75. I’m recommending a fair price, but it may take a bit longer than usual to get our orders filled. If no trades execute there, I will adjust our limit price accordingly.
MarineMax’s strong winter and spring uptrend is so extremely consistent I want us to get in now, and see if we can force a position in this option at a legitimate price.
The stock failed to rally only once in the past six years, from November 2013 to January 2014, when it stayed flat because of a challenging holiday season for the boating industry. Since then, the company has focused more on online efforts. And last year, the stock saw a 42% jump from November through April.
This year, I expect another rise — I’ll conservatively target 25% … which means a big move for the options we’re buying. Particularly since Chris tells me this spring will provide the perfect boating environment for many of MarineMax’s operating locations, which include much of the Southeast, the Northeast, California, Minnesota, Missouri, Oklahoma and Texas.
Here’s what he told me:
After putting up with a wet, chilly winter across Texas and Oklahoma, spring 2016 will see a nice warm-up from March through May — providing ideal conditions for fishing. The weather across the Southeast and up the East Coast to Connecticut will start to dry out, too, and people will think about getting out to the dock.
MarineMax’s Ohio and Tennessee outlets may see struggling sales as the cooler and wetter conditions continue through spring. However, Minnesota will emerge from a mild winter into a warm spring.
California and Arizona’s stores will experience cooler than normal temperatures February through May. But El Niño’s rains will add water to the lakes, which will certainly bring out boat enthusiasts, buoying up MarineMax’s same-store sales.
So let’s buy the April $15 call options today, which will perfectly capture MarineMax’s coming uptrend.
Until next time, good trading…
Editor, Precision Profits